Real Estate Investment Trusts (REITS) are beginning to gain traction in the solar industry with the close last week of a transaction for approximately 100 acres of land that supports over 20MW of utility-scale projects located near Fresno, California.

REITS are often used in the real estate sector to raise capital to build commercial spaces like car parks, shopping centres and office blocks. But due to the complex nature of financing and ownership models for solar projects and regulatory restrictions from the Inland Revenue Service, developers have struggled to tap into these capital structures.

Power REIT, based in New York, acquired the land for $1.6 million with 25-year lease agreements with the solar developer. Payments will be $157,500 per annum when commercial operation begins in early 2014. Southern California Edison (SCE) or Pacific Gas & Electric (PG&E) both have long-term power purchase agreements with the projects.

Arun Mittal, executive vice president at Power REIT, said that ground-mount utility-scale projects had become an increasing focus for the company, whose background derives from railroad and infrastructure.

"We think there's a large opportunity for us to invest capital in this space," he told PV-Tech yesterday. "It's probably not for every developer and every project, but by bringing us into the capital structure we can deliver better economics to that developer or asset owner.

"We're looking to invest in very clearly defined real estate - not the holy grail of revenue ruling that qualifies a bunch of projects. Where we sit today we're seeing a lot of opportunities to invest in the real estate elements of a solar project that historically have not qualified for tax credits or accelerated depreciation."

The 20MW projects in Fresno represent Power REIT's second investment after a 6MW investment in Salisbury, Massachusetts, made at the end of 2012.

Some 80% to 90% of Power REIT's transactions are in solar, with some wind projects. Equity yields are expected in the mid to high-teens.

"Returns are comparable with other asset classes of investment in the infrastructure side," he said. "There's less volatility in wind than solar as you don't have as much operating risk.

"We're bullish. We don't think that this is a short-term, six-month business. We're really trying to grow a long term business and create significant value for shareholders."

Power REIT is seeking to expand its real estate portfolio within the renewable energy sector and is pursuing investment opportunities within solar, wind, hydroelectric, geothermal, transmission and other infrastructure projects that qualify for REIT ownership.